Question

 Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $113,100 of manufacturing overhead for an estimated allocation base of $87,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

 Required:

 1. Compute the predetermined overhead rate for the year.

 2. Compute the amount of underapplied or overapplied overhead for the year.

 3. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials. 4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer. 5. Assume that the $39,000 ending balance in Work in Process includes $8,200 of direct materials. Given this assumption, supply the information missing below:

Answer 1

1) Predetermine overhead rate = 113100/87000 = 130% of direct material used

2) Overhead applied = (29000+139000-12000)*1.3 = 202800

Actual overhead = 207500

Under applied overhead = 207500-202800 = 4700

3) Schedule of cost of goods manufactured

Direct material
Beginning raw material	29000
Raw material purchase	139000
Raw material available for use	168000
Less: Ending raw material	-12000
Direct material		156000
Direct labor		83000
Overhead applied		202800
Total manufacturing cost		441800
Beginning work in process		47000
Total cost of work in process		488800
Less: Ending work in process		-39000
Cost of goods manufactured		449800

Unadjusted cost of goods sold = 449800+69000-60000 = 458800

Direct material	8200
Direct labor	20140
Overhead (8200*1.3)	10660
Work in process inventory	39000